It’s one of the most active stocks today. And for good reason …
This morning we learned that Tesla just won China’s backing for its FSD service. Without a doubt, this is a very big deal.
I actually wrote about this very thing a few weeks ago, noting that Tesla’s success will likely be tied to its tech and subscription services more than its actual cars. And part of that is FSD. Check it out …
When I first bought my Tesla, I had the option of purchasing FSD for $15,000. While I’m enthusiastic about FSD, I couldn’t really justify the cost. I suspect a lot of folks are like me in that respect, too.
But last week we learned that Tesla will now be offering FSD for $99/month. For those keen on FSD, such a price cut is likely to be a motivator to pony up for it. Certainly a good thing for Tesla, given some of the pressure the stock has experienced over the past couple years. After all, if just 2 percent of all U.S. Tesla owners sign up, Tesla’s looking at roughly $68.9 million a year in FSD subscription revenue.
When I wrote that piece, I wasn’t convinced that most people truly understood the underlying value of Tesla’s FSD technology. But with this news coming out of China, that could change.
As reported in the Wall Street Journal, China has signaled that it will allow Tesla to roll out its advanced driver-assistance service in the carmaker’s second-biggest market.
Musk is stepping up efforts for wider adoption of FSD after the world’s most valuable automaker saw its first-quarter profit drop to its lowest level since 2021. Being able to roll out FSD in China would help Tesla compete with major Chinese carmakers that have already provided higher-level driver-assistance features.
With the government’s blessing, Tesla has reached an agreement with Baidu (NASDAQ: BIDU) that will allow the company to access Baidu’s mapping license for data collection. Worth noting: Baidu is also one of the most active stocks today.
To clarify, in China, any “intelligent driving systems” must obtain a mapping qualification before operating on public roads. Now here’s the rub: this qualification is only available to Chinese companies. So in order for Tesla to move forward with this, it decided to link up with Baidu, which is one of only about a dozen companies in the Middle Kingdom that has one of these mapping qualifications.
But again, this is a very big deal. After all, China continues to boast the largest and fastest-growing EV market in the world. And since Tesla has been the only U.S. EV maker smart enough to jump through all of China’s hoops to access that market, Musk’s aggressive roll-out of FSD in China could prove to bolster the value of the company. Not just as a carmaker, but as a tech provider. Certainly it’s already doing that with its charging network dominance in the U.S. That alone is expected to generate as much as $20 billion in yearly revenue by 2030.
That’s a lot of scratch! And with Tesla’s FSD entering the Chinese market, the potential revenue from licensing its FSD technology there could be massive, too. Particularly as China EV makers continue to rapidly expand across the globe. Some of these include:
- BYD (OTCBB: BYDDY)
- Geely (OTCBB: GELYF)
- Li Auto (NASDAQ: LI)
- NIO (NYSE: NIO)
- XPeng (NYSE: XPEV)
Make no mistake: the future of personal transportation will be a future of standardized autonomous driving. And if Tesla is successful in licensing its FSD technology in China this early in the game, it could quite possibly own the lion’s share of this market before the end of the decade.
The most Active Stocks Today aren’t just Tesla and Baidu
While Tesla and Baidu are seeing a lot of trading action today, there are two others worth including in this piece.
The first is Deciphera Pharmaceuticals (NASDAQ: DCPH), which soared more than 70% after the company announced it was being acquired by Japan’s ONO Pharmaceutical for $2.4 billion.
Koninklijke Philips N.V. (NYSE: PHG), also got a nice boost today after announcing it reached a $1 billion settlement regarding a recall for its respiratory ventilator devices.
The stock has been under a lot of pressure since mid 2021, after it plummeted from a high of $56.48. Before today’s news, the stock was trading for less than $30.
Of course, even with today’s 30% gain, it’s still trading nearly 50% below its 2021 high. It’ll be interesting to see how the stock performs going forward, though, now that this settlement is wrapped up. Particularly that the settlement came in below what most analysts anticipated. Some actually expected it to reach as much as $4 billion.
To clarify, the company is still prohibited from selling some of its respiratory equipment in the United States. But that’s far less of a concern than angry former patients seeking damages. Only time will tell, but once the smoke clears from all of this, I see no reason why the stock can’t inch back up over $30 a share this year. Certainly we’ll find out soon enough.
